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    Economies of scale in the chicken farming industry

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    The Smythe chicken farm outside Little Rock, Arkansas, produces 25,000 chickens per month. Total cost of production at Smythe Farm is $28,000. Down the road are other farms. Faubus Farm produces 55,000 chickens a month, and total cost is $50,050. Mega Farm produces 100,000 chickens per month, at a total cost of $91,000. These data suggest that there are signified economies of scale in chicken production. Do you agree or disagree with this statement? Explain your answer.

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    Solution Preview

    Smythe's Average Total Cost (ATC) is $1.12 per chicken. Faubus' ATC is 91.8 cents. ...

    Solution Summary

    This solution shows how to determine, given production and cost data, whether there are significant economies of scale in the chicken farming industry.